REGIONAL investors were more concerned yesterday over Greece's debt crisis than dovish signals that United States interest rates may rise more slowly.
Most Asian bourses lost ground with the risk of a Greek exit (Grexit) from the euro zone hanging in the balance as European Union finance ministers prepared to meet in Luxembourg.
Comments from the Federal Reserve on US rate hikes sent the greenback skidding against many Asian currencies but this failed to lift most regional bourses.
Rather, traders were sidelined ahead of the outcome of the EU finance ministers' meeting over Greece's deepening debt crisis, which looks set to come to a head if the country cannot reach a deal with its creditors.
Singapore shed 0.77 per cent, while Japan lost 1.13 per cent. Tighter margin lending and fears of shrinking liquidity sent Shanghai plunging 3.67 per cent and Shenzhen sinking 3.57 per cent. Political tensions again dogged Hong Kong, which slipped 0.2 per cent.
The US Fed said that it still plans to start raising rates before the end of the year but much more slowly than previously forecast. Projections for US economic growth this year have been cut by the Fed to between 1.8 per cent and 2 per cent. In March, they predicted growth of 2.3 per cent to 2.7 per cent. More policymakers now favour hiking rates only once or not all this year.
The Fed kept its forecast for the benchmark rate to rise to 0.625 per cent this year, while cutting its 2016 projection to 1.625 per cent - lower than its median March estimate of 1.875 per cent.
Fed chair Janet Yellen stressed the date of the first rate rise is less important than the trajectory of subsequent ones. She said tightening would be "gradual", and that the Fed would not follow a "mechanical" formula. She also emphasised that even after rate hikes began, borrowing costs would remain low for years.
"The era of easy money looks to have been given extended life support - don't expect it to end any time soon," Phillip Futures investment analyst Howie Lee said.
The greenback weakened against most Asian currencies. The Malaysian ringgit strengthened sharply to RM3.7033 from RM3.7573 on Wednesday, and is up 1.9 per cent since its year low at RM3.7745 on June 8.
The Singdollar firmed against the greenback to S$1.3308 from S$1.3479, and the ringgit fell to RM2.7914 against the Singdollar from RM2.7882 on Wednesday.
Korea's won made healthy gains against the greenback, to 1,103.04 won from 1,120.24 Wednesday.
Gold gained as the dollar sank. Bullion for immediate delivery rose 0.2 per cent to US$1,188.04 an ounce by 2.15pm here, after rising 0.6 per cent on Wednesday, Bloomberg data showed. "Gold may take its cue from a dovish Fed and could make its way back to the level of US$1,200 in the near term," Mr Lee said. "September now looks like the time for the first rate hike, although I won't rule out December."
